Whitebread's withdrawal from Premier Inn will not impact Costa Coffee

Whitbread said in a statement that it will withdraw from its three hotels in India “in a phased” wayRatna Bhushan | ET Bureau | July 14, 2016, 12:13 IST

UK firm Whitbread, owner of budget hotels Premier Inn and coffee chain Costa Coffee, is withdrawing its Premier Inn business from India and South East Asia, the FTSE 100 firm announced late Wednesday.

“The withdrawal does not in any way impact Costa Coffee’s India business. Our association with Costa Coffee remain unchanged,” the British coffee chain’s Indian franchisee partner Ravi Jaipuria told ET. Whitbread said in a statement that it will withdraw from its three hotels in India “in a phased” way.

“A key strategic theme is to focus on our strengths internationally and that means identifying those opportunities to invest our capital and management time wisely to generate the best and most sustainable returns,” Alison Brittain, chief executive of Whitbread said in the statement. The statement also said that the cost of exiting Premier Inn out of India and South East Asia “is not considered material”.

The hospitality firm, instead, said it would focus on a “smaller number of specific markets where it can generate good long- term sustainable returns and where there is the greatest long term opportunity to build scale.” Costa Coffee had entered India in 2005 through an exclusive franchisee deal with the Ravi Jaipuria-promoted group company Devyani International.

The slowdown in discretionary spending has impacted the eating out market in India, which includes cafes and quick service restaurants. Almost all the chains have been reporting low single-digit same store sales and are competing on value meals and promotions to accelerate growth and incremental ticket sizes.

While globally cafes operate largely on a takeaway culture which allows retailers incremental margins, in India, steep overhead costs such as rentals and service make it tougher for the cafes to sustain profitability Costa Coffee competes with the homegrown Cafe Coffee Day, American chain Starbucks which entered India through a tie-up with Tata Global Beverages, and Dunkin Donuts operated by Jubilant FoodWorks.